Oticon, which was founded in 1904 by William Demant, is a Danish firm, and a leader in manufacturing hearing aids in Europe

and the rest of the world, as well. However, during the 1980s, a new small American company, which designed a new and innovative model of hearing aids, entered aggressively the market, and caused decreased sales for Oticon. The reaction of Oticon was immediate, as they decided to reconstruct the whole structure of the company, so as to boost their efficiency and profitability. This process lasted for almost three years, and resulted to dramatic changes, which helped Oticon to regain profits, and become again a leader in their sector.

The change process: Think the unthinkable

The recruitment in 1988 of a new CEO, Lars Kolind, who was given full responsibility for implementing the necessary changes in the organization. After a 2-year period of rationalization and cost reduction the newly appointed CEO suggested in early 1991 a very broad "package" of innovative and radical initiatives in organizational structure, job design, information technology and physical layout of the company. The suggested changes were: Increasing competitiveness by utilizing human and technological resources in a more efficient way, hence reducing the overhead costs which at that time exceeded the actual production costs. Replacing a hierarchical job structure with a project based organization where each employee is involved in a number of (often cross-organizational and crossfunctional) projects at the same time, and where each project is considered a "business unit" with its own resources, time schedule and success criteria. Abandoning traditional managerial jobs and attributing managerial authority to the project groups or the individual employee. Reducing drastically written paper communication by establishing electronic scanning of all incoming mail and introducing very comprehensive information technology systems, networks etc. Facilitating physical mobility by creating an open space office where each person has a cart or trolley (i.e. filing cabinet on wheels containing the computer, the phone and a limited space for paper) which can be moved around in the office.

The overall objective was increasing the productivity. The plan was implemented in 1991 when the headquarter was relocated to a building which had been especially designed to support the physical, organizational and technological flexibility of the organization. Thus, in order to maximize the physical flexibility, a fairly big open space office made the free movement of the trolleys possible, and the coffee bars and the caf (which is not supposed to be called a canteen) created extensive opportunities for informal 1|Page

exchange of information and experiences. The three floors were connected by a wide staircase where people unavoidable "bumped" into each other. (The elevators were only used by disabled persons or to move the trolleys from one floor to another and required a key from the reception). Project teams became the basic organizing unit of the new organization. These teams had from 2-3 up to 20 or even 50 participants, and the project leader could choose how to achieve the agreed upon objectives of the project, and who should be a member of the team, as long as he or she met the project specifications (in terms of time, resources and quality). Everyone could in principle become a team leader, provided he or she had the necessary technical and leadership skills. Strong emphasis was put on providing abundant facilities for information technology, and to speed up the employees' familiarity with the computers, all staff was equipped with a computer at home. All incoming mail was delivered to one particular room where the employees came to read it. All important mail was scanned into the electronic information system, after which the paper was shredded. Written communication within the organization was almost exclusively computerized. A number of symbolic acts and psychological elements supported the change process: The CEO stressed clearly and frequently that most of his ideas about managing an organization came from the boy scout movement which he is - and for a long time has been - involved in. This philosophy implied (in the company) that work was driven by personal motivation and enthusiasm as well as willingness to share knowledge and work as a team across borders The CEO had no office himself, but moved around when appropriate with his trolley like any other employee. The paper-shredder in the mail-room was connected to a transparent tube which passed through the building, including the caf. The symbolic effect of seeing all the shredded paper when you passed the tube or had lunch was quite noticable. The tube which is still kept as a cultural artifact signified a liberation from written communication, as well as the speed and agility of electronic communication. In addition and somewhat paradoxically - it also institutionalized the belief in the strength of oral communication, nogotiations and agreements. Paper was replaced by either e-mails or handshakes, so to speak.

The project organization implied that there were hardly any middle managers left. Top management decided which projects should be started up and who should be the project leaders, but the project leaders had (and still have) the responsibility for managing resources, outcome, budget and time table for their own project. Any staff member was encouraged to put forward project proposals. A number of senior specialists (mainly middle managers from the "old" organization) were given a role as centers of technical expertise, but did not have a managerial role in a traditional sense and did not have any subordinates. In principle, it was a two-layers organization (consisting of the management team and the rest consisting of all employeers regardless of the way in which they were involved in projects and/or were technical 2|Page

experts). As a consequence of the organizational design, titles and job descriptions were abandoned. The fact that all employees could in principle become project leaders meant that a project leader for one project could be an ordinary member of other project teams. The human resource responsibility was undertaken partly by the project leaders, partly by a number of coaches. Each employee appointed a coach for himself or herself. The coach could only turn down the request if he or she was already the coach for a fairly large number of employees. In addition, all the project team leaders, for whom a specific employee worked at any given time, had - collectively the responsibility for certain HRM issues like salary adjustment, performance management etc. So, in short, the organization had three managerial structures: project team leaders, functional experts and coaches. Hence, the traditional managerial hierarchy has been replaced by three types of roles: project managers (which the overall responsibility for projects) senior specialists (being centers of professional expertise in functional areas) coaches (performing a mentor and other HR related roles). None of these replace the hierarchical structure, but they support jointly, but from three different corners managerial processes of the organization. This meant in practice that you as an emloyee went to the the project team leader(s) if you had a problem with the project, you went to the expert if you had a technical problem and you discussed career plans with your coach. The three underlying parameters (project structure, functional expertise and emphasis on human resouces) were seen as the most vital competitive factors of the organization. Evaluation of the organizational changes In general, the radical changes in organizational features led to a successful integration of audiology, psychology and technology. The success can be attributed to the following factors: there was room for improvement in the organization when Project 330 was launched the board of directors gave the new CEO almost complete freedom of action the organization itself felt a strong need for change the changes were implemented in a radical and immediate way the existing organization was consolidated (by cost cutting rationalization), before the radical changes were initiated a common set of values were explicitely dealt with and accepted the organizational change affected mainly the organizational core structure, organization and technology were changed at the same time the new culture got a chance to become established before further changes were implemented a consolidation of the achieved changes and results created a new balance.

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Possibilities and limitations

In short, the case shows how the "old" Oticon got into trouble, despite its market success up until the 70s and early 80s. It shows, how organizational and technological changes are intertwined, and how important it is to have a precise strategic outlook when initiating a turn-around process. It shows how a knowledge based organization can reveal previously untapped human resources by changing working conditions, job content and managerial style. And it shows, how one individual (the CEO) by his own value system, his visible behavior, his trust in people and his courage to experiment got the company into a good shape. From the outset, the belief in the strength of the organic, flexible project management ideology was almost unlimited. In this democratic form of management, in principle everyone has a chance to become project leader and serve as a team member in other project. However, it turned eventually out that some projects were viewed as more important than others. Also, some projects were more successful than others, in terms of how well the team members worked together and what the outcome of the team effort was. So employees competed with each other to be part of the projects they perceived as most desirable. Also, there was after the first few years a growing recognition that project management was simply not professional enough. It could not he handed out as a democratic commodity to become a project manager. This led as described above - to an intensive project management development program and a closer screening of who were assigned to become project managers. The roles of project managers were spelled out, a systematic selection procedure for project managers was implemented, courses in project management were conducted, and external recruiting of people with project management experience was introduced. The professionalization of project management (and managers) is illustrating how Oticon is deliberately stressing the largest possible distance to traditional concepts of management and at the same time sneaking elements of traditional management in through the backdoor. As one employee expressed it: Employees cant speak openly about management development and about moving up in the hierarchy. Traditional management views have become practically taboo. However, traditional management problems still exist. Another person said, Oticon does need management, but it is odious to speak of management. Others speak about the hierarchy that isnt there, but naturally is there anyway. And: Functional managers well, we dont call them that, of course, we call them technical specialists for development and economy and marketing etc., but in fact they are function managers. Employees have mixed feelings about the consequences of this for career. On the one hand, some find it pleasant not to have to compete for limited promotions. On the other hand, some find this frustrating in that there are few obvious ways to advance in the company.

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So, there are pros and cons to a spaghetti style organizational structure when it comes to career development. The unthinkable proved to be not only thinkable but also realistic and successful. The firm showed that it could be financially successful and have an exciting, dynamic organization at the same time, hereby disconfirming pessimistic views that the revolution would take place at the expense of business success. However, many modifications of the radical organizational design have been made. For instance, the idea of the movable workstations was realized, but the physical setting (trolleys which can be moved) is only changed a couple of times a year now - not several times per day, as it was initially envisaged. Project groups have been retained but are now supported by a professional project management organization. The free and equal access to projects still exists, but a discreetly informal project hierarchy and personal status variations send (in)visible signals about where to turn in order to tap resources and secure good tasks. The vision and the fundamental human values regarding the employees are still unflagging, but have been revised, so the values now are supported by statements listing the obligations for management as well as the individual employee (see Table 1). The nearly religious conviction that management should not be personified and hierarchically rooted is undiminished, but some employees experience unsatisfactory career development opportunities. The company maintains that every employee - despite education, job assignments and position in the organization - has a career and may shape a career, but still a minority of employees consider themselves to be placed outside the Oticon mainstream. This is partly caused by the survival of the fittest culture of the company which is to the benefit of people who can and want look after themselves and make a difference. Survival of the fittest means that opportunities are not served to you on a plate, but have to be found and gained. Career success is exclusively a matter of your ability to create your own career path, not just follow a path which has been established by the organization. Communication channels are not clearly marked roads through the landscape you have to find your own path. Systems, procedures and reporting are kept at a minimum so you have to search information, reflect and act yourself. Power bases are earned, not given to you, and are based on knowledge, initiative and the capability to employ oneself. If career is defined as the subjective perception and interpretation of development opportunities, challenges and work achievements, Oticon is a superb career environment. In contrast, the company does not cater for and does not meet the expectations of perople with hierarchical career ambitions. These are not catered for in a spaghetti organization like Oticon.

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